Lee Enterprises narrows fiscal Q2 net loss to US$6M from US$26.6 in year-ago period, net sales down 2.4% to US$160.6M with print and digital ad revenues down 5.3%, circulation revenues up 3.4%
Kendall Sinclair
DAVENPORT, Iowa
,
April 23, 2013
(press release)
–
Lee Enterprises, Incorporated (LEE), a major provider of local news, information and advertising in 50 markets, today reported an improved revenue trend and continued cost reduction for its second fiscal quarter ended March 31, 2013. Preliminary(1) results reflect a loss of 12 cents per diluted common share, compared with a loss of 54 cents a year ago. Excluding unusual matters, adjusted loss per diluted common share(2) totaled 5 cents, compared with a loss of 3 cents a year ago.
"Lee continues to post strong cash flow and reduce debt ahead of schedule as we build on our ability to resume revenue growth," said Mary Junck, chairman and chief executive officer.
She also noted:
SECOND QUARTER OPERATING RESULTS(3)
Operating revenue for the 13 weeks ended March 31, 2013 totaled $160.6 million, a decrease of 2.4% compared with a year ago. Combined print and digital advertising revenue decreased 5.3% to $106.5 million, with retail advertising down 2.7%, classified down 7.0% and national down 20.1%. Combined print and digital classified employment revenue decreased 3.0%, while automotive decreased 12.6%, real estate decreased 11.0% and other classified decreased 3.8%. Digital advertising revenue on a stand-alone basis decreased 0.1% to $15.0 million. Print advertising revenue on a stand-alone basis decreased 6.1%. Circulation revenue increased 3.4%.
Operating expenses, excluding depreciation, amortization and unusual matters, decreased 2.9%. Compensation decreased 6.2%, with the average number of full-time equivalent employees down 8.2%. Newsprint and ink expense decreased 12.5%, a result of a reduction in newsprint volume of 10.5%. Other operating expenses increased 3.9%.
Operating cash flow(4) decreased 0.9% from a year ago to $31.9 million. Operating cash flow margin(4) increased to 19.9% from 19.6% a year ago. Including equity in earnings of associated companies, depreciation and amortization, as well as unusual matters in both years, operating income increased 10.3% to $18.7 million in the current year quarter, compared with $16.9 million a year ago. Non-operating expenses, primarily interest expense and debt financing costs, increased 9.8%, due to higher interest rates on debt, which were partially offset by lower debt balances. The Company recognized $36.6 million of reorganization costs in the prior year quarter. As previously reported, the Company completed the sale of The Garden Island in the quarter, resulting in a loss of $2.1 million after income taxes, which is included in discontinued operations. Loss attributable to Lee Enterprises, Incorporated for the quarter totaled $6.0 million, compared with a loss of $26.6 million a year ago.
ADJUSTED EARNINGS AND EPS FOR THE QUARTER
The following table summarizes the impact from unusual matters on loss attributable to Lee Enterprises, Incorporated and loss per diluted common share. Per share amounts may not add due to rounding.
13 Weeks Ended
March 31
2013
March 25
2012
(Thousands of Dollars, Except Per Share Data)
Amount
Per Share
Amount
Per Share
Loss attributable to Lee Enterprises, Incorporated, as reported
(5,995
)
(0.12
)
(26,625
)
(0.54
)
Adjustments:
Debt financing and reorganization costs
1,454
38,635
Other, net
506
463
1,960
39,098
Income tax effect of adjustments, net
(689
)
(13,810
)
1,271
0.02
25,288
0.51
Unusual matters related to discontinued operations
2,181
0.04
48
-
Loss attributable to Lee Enterprises, Incorporated, as adjusted
(2,543
)
(0.05
)
(1,289
)
(0.03
)
YEAR TO DATE OPERATING RESULTS(3)
Operating revenue for the 26 weeks ended March 31, 2013 totaled $345.3 million, a decrease of 2.9% compared with a year ago. Combined print and digital advertising revenue decreased 5.8% to $234.6 million, with retail advertising down 3.3%, classified down 7.3% and national down 22.5%. Combined print and digital classified employment revenue decreased 5.8%, while automotive decreased 9.7%, real estate decreased 11.2% and other classified decreased 4.7%. Digital advertising revenue on a stand-alone basis increased 2.4% to $31.2 million. Print advertising revenue on a stand-alone basis decreased 6.9%. Circulation revenue increased 3.7%.
Operating expenses, excluding depreciation, amortization and unusual matters, decreased 3.4%. Compensation decreased 5.5%, with the average number of full-time equivalent employees down 8.4%. Newsprint and ink expense decreased 12.8%, a result of a reduction in newsprint volume of 11.6%. Other operating expenses increased 1.6%.
Operating cash flow(4) decreased 2.0% from a year ago to $83.4 million. Operating cash flow margin increased to 24.2% from 23.9% a year ago. Including equity in earnings of associated companies, depreciation and amortization, as well as unusual matters in both years, operating income increased 4.1% to $58.2 million in the current year, compared with $55.9 million a year ago. Non-operating expenses increased 10.5% due to higher interest rates on debt, partially offset by lower debt balances and a $6.9 million gain on sale of an investment. The Company recognized $37.9 million of reorganization costs in the prior year. Loss from discontinued operations, net of income taxes totaled $1.2 million in the current year compared to $0.1 million a year ago. Income attributable to Lee Enterprises, Incorporated totaled $8.6 million, compared to a loss of $12.1 million a year ago.
ADJUSTED EARNINGS AND EPS FOR THE YEAR TO DATE
The following table summarizes the impact from unusual matters on income attributable to Lee Enterprises, Incorporated and income per diluted common share. Per share amounts may not add due to rounding.
26 Weeks Ended
March 31
2013
March 25
2012
(Thousands of Dollars, Except Per Share Data)
Amount
Per Share
Amount
Per Share
Income (loss) attributable to Lee Enterprises, Incorporated, as reported
8,575
0.17
(12,072
)
(0.26
)
Adjustments:
Debt financing and reorganization costs
3,122
41,776
Gain on sale of investment, net
(6,909
)
-
Other, net
1,309
742
(2,478
)
42,518
Income tax effect of adjustments, net
865
(15,003
)
(1,613
)
(0.03
)
27,515
0.58
Unusual matters related to discontinued operations
1,014
0.02
73
-
Income attributable to Lee Enterprises, Incorporated, as adjusted
7,976
0.15
15,516
0.33
DEBT AND FREE CASH FLOW(5)
Debt was reduced $23.9 million in the quarter, $52.9 million for the year to date and $72.5 million in the last 12 months. At March 31, 2013, the principal amount of debt totaled $893.0 million, just under the amount projected in Lee`s Plan of Reorganization for September 2014. Free cash flow from continuing operations totaled $9.8 million for the quarter, compared with $0.5 million a year ago. An increase in interest expense in the current year quarter adversely impacted free cash flow, while debt financing and reorganization costs reduced prior year results. Absent a significant increase in LIBOR, Lee expects financial expense to begin to decline in the June 2013 quarter due to lower debt balances and cycling of interest rate changes. Free cash flow in the 53 weeks ended March 2013 totaled $63.2 million, net of $8.9 million of debt financing and reorganization costs paid. Liquidity at the end of the quarter totaled $51.2 million, compared to required debt payments of $14.4 million in the next 12 months.
ABOUT LEE
Lee Enterprises is a leading provider of local news and information, and a major platform for advertising, in its markets, with 46 daily newspapers and a joint interest in four others, rapidly growing digital products and nearly 300 specialty publications in 22 states. Lee`s newspapers have circulation of 1.2 million daily and 1.4 million Sunday, reaching nearly four million readers in print alone. Lee`s websites and mobile and tablet products attracted 23.2 million unique visitors in March 2013. Lee`s markets include St. Louis, MO; Lincoln, NE; Madison, WI; Davenport, IA; Billings, MT; Bloomington, IL; and Tucson, AZ. Lee Common Stock is traded on the New York Stock Exchange under the symbol LEE. For more information about Lee, please visit www.lee.net.
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